Late last week the Senate Republicans spoke of the components of a comprehensive package of issues including the severance tax, limitations to local ordinances, pooling, regulation of intrastate pipelines by the Public Utility Commission, well-site inspection standards, expanded chemical disclosure requirements and distances drilling can occur from seams of coal. On the severance tax one might say that the tax in Arkansas is “the floor” and the tax in West Virginia is “the ceiling.” No details have emerged yet and the Senate has not had active discussions with the House and/or the Rendell Administration. Below is a chart showing the severance tax structures of several states and a comparison of the Corporate Net Income Tax in each one.
|State||Corporate Net Income Tax (1)||Severance Tax|
|Arkansas||1.0-6.5||Rate varies with the price of gas. The rate is 1.5% for the first 36 months.|
|Colorado||4.63||5.7% with a property tax offset|
|Louisiana||4.0-8.0||28.8 cents per thousand cubic feet|
|Oklahoma||6.0||7%. Oklahoma exempts horizontal wells until payback|
|Texas||No CNI (Texas imposes a Franchise Tax, known as the margin tax. It is imposed at 1.0% (0.5% for retail or wholesale entities) of gross revenues over $300,000, with a variable discount allowed for businesses with revenues between $300,000 to $900,000.||2% to 7.5%. Texas law provides for a “tight sands” reduction to 2% for a well for the first 10 years. This includes the Barnett Shale|
|Pennsylvania||9.99||(Proposed) 5.0% plus $.047/mcf|
|West Virginia||8.5||5.0% plus $.047/mcf|
(1) Federation of Tax Administrators
The House Consumer Affairs Committee held a hearing this week on HB 1817. The bill would authorize PA to join the Mid-Atlantic Area Natural Gas Corridor Compact; providing for the formation of the compact; imposing additional powers & duties on the Governor & the Secretary of the Commonwealth. Representative Curt Schroder commented on the impetus for his bill. He said it is primarily because “the current system of citing natural gas pipelines is broken.” He said both individual and commercial property owners “pay the price” when the Federal Energy Regulatory Commission (FERC) “acts as a rubber stamp to take the least expensive route to their destination.”
Rep. Schroder said he introduced the legislation “in order to level the playing field and provide a review and approval process that will facilitate reasonable pipeline expansion while protecting our citizens, neighborhoods, and natural resources.”
A group of individuals from the Chester County area testified about their personal experience. To read one of the individual’s testimony, click here. Testimony was also submitted by Terry Fitzpatrick of the Energy Association of Pennsylvania to read his testimony, click here.